Israel Sees Rise in Digital Payments, Leaving Cash Users Behind
Translated & summarized from Bizportal by baba
A Bank of Israel report reveals a surge in digital payments, with 47% of Israelis using digital wallets weekly, up from 5% in 2019. This trend, however, disadvantages the 53% who still use cash or traditional credit cards, as they are often excluded from discounts and pay higher prices. The digital divide is particularly pronounced in the Arab and ultra-Orthodox communities, and among the elderly. While the government encourages digital payments to combat the black market, the Bank of Israel warns of potential increased costs for cash-dependent consumers and businesses.
The story in 6 lines · by baba
- 47% of Israelis now use digital wallets weekly, a significant increase from 5% in 2019.
- 53% of Israelis are left behind by the digital payment trend, facing higher prices.
- Retailers offer discounts of up to 15% only for digital payments, penalizing cash users.
- The Arab community heavily relies on cash, with it comprising 75% of their transaction value.
- The Bank of Israel is concerned about increased costs for cash-dependent consumers and businesses.
- The government promotes digital payments to combat the black market and increase tax collection.
A significant shift towards digital payments is underway in Israel, with the number of Israelis using digital wallets on their phones at least once a week surging from 5% in 2019 to 47% currently, according to a new report from the Bank of Israel's Currency Department. The total volume of transactions through these apps reached approximately 98 billion shekels this year. However, this digital revolution creates a hidden cost for the 53% of Israelis who still rely on traditional credit cards and cash. These consumers are effectively paying a premium, as many retailers offer discounts of 5% to 15% exclusively for digital wallet or app payments, while those using cash or regular credit cards pay the full price. This practice allows retail chains to increase prices indirectly for customers who do not adopt their digital payment methods.
The report highlights that digital wallet usage is nearly on par with cash, with 47% using mobile payments weekly compared to 48% still using cash. This trend, while efficient on paper, leads to significant consumer discrimination against the 53% not participating in the digital shift. The Bank of Israel notes that physical credit cards and cash are being abandoned by those adopting digital wallets. Further data reveals a stark divide: while cash accounts for 43% of daily transactions by number and 32% by value nationwide, its use is dominant in the Arab community (75% of total transaction value) and significant among the ultra-Orthodox and those aged 65 and over (a quarter of purchases). In contrast, cash use has dropped to only 15% of transaction value in the non-ultra-Orthodox Jewish community.
This digital exclusion disproportionately affects vulnerable populations, including the elderly, youth, and those reliant on physical currency, who are regularly denied app-based discounts and face higher product prices. The problem is compounded by the increasing removal of cash payment options in automated parking, vending machines, and self-checkout lanes, forcing reliance on mobile devices. Despite the decrease in daily cash transactions for small purchases, the physical amount of cash circulating in Israel has actually grown by an average of 2% annually over the past two years, with about 70% of Israelis keeping cash at home as a backup for emergencies.
While consumer groups are concerned, government ministries and the Tax Authority have a vested interest in reducing cash usage to combat the black market, improve financial tracking, and increase tax collection, a move reinforced by the law to reduce cash use. The Bank of Israel, however, expresses official concern. Limor Goldstein, Director of the Currency Department, emphasized the bank's commitment to maintaining cash accessibility. The bank warns that a decline in physical cash use could lead to reduced cash services from couriers and banks, significantly increasing fees and operational costs for small businesses and consumers still dependent on it. In its pursuit of combating illicit money, the state is leaving behind those without digital wallets and allowing retailers to penalize them with higher prices, eroding consumer choice and disproportionately burdening the most vulnerable.
